Derp Report Now Certified as BRS Trainer

I encourage all of you to log in to MyPay and save the “Printer Friendly” view of your LES when it posts around the 25th of each month. This will allow you to check beyond a year worth of LES without going to PSD. In the last few months you might of noticed the following paragraph at the bottom of your LES:

THE FIRST IN A SERIES OF BLENDED RETIREMENT SYSTEM (BRS) COURSES IS NOW AVAILABLE: LEADER TRAINING TO INTRODUCE BRS FOR THE UNIFORMED SERVICES (.5 HOUR), COURSE NUMBER: J3OP-1330 VIA JOINT KNOWLEDGE ONLINE (JKO) LOCATED AT HTTPS://JKODIRECT.JTEN.MIL/. ANY INTERESTED MILITARY OR FAMILY MEMBER CAN ALSO TAKE THE COURSE VIA MILITARYONESOURCE AT HTTP://WWW.MILITARYONESOURCE.MIL/

So like a good certified financial advisor I took the training so you don’t have to. I want to summarize the Blended Retirement System (BRS program) to bring this subject back as we approach the drop dead date of 31 Dec 2018. You can always log into JKO yourself and do the training. It is listed under “J3O P-US1330” with an insanely long name.

I have been talking about the Blended Retirement to more senior officers, and some have stated some discontent of not being able to participate in the new program. I found this feeling to be surprising, because on paper it just seems the old High 36 would be better pay in the long run. They inform me it’s always better to have the choice and to not assume that you would make 20 years. There has been some question of my previous analysis being flawed in the fact that I assume Making O-6 and living a good long life into my 120s.

I also am assuming that this isn’t high level stuff as it is open to the public on Military One Source. and according to the Copyright status of work by the U.S. government all of this information in the training is unclassified and public domain. The entire training is summarized in this single PDF here which is a pretty good go by. Pretty much the only thing that is changing is taking away 20% of your retirement to pay yourself 5% from the government now.

Eligibility:

Members who have completed fewer than twelve years of service by the end of two thousand seventeen will have an important decision to make: whether to stay under the current retirement system or to opt into the new system. There is no, single, “right” answer. Each member’s decision will depend entirely upon his or her own circumstances.

If on 31 Dec 2017 you have more than 12 years in Active Duty, then you have no choice to make. You must stay with the old cliff retirement of 2.5% of base pay per year in active duty. For example 20 years of service multiplied by 2.5% you get 50% of base pay when you retire, if you do 21 years you will get 52.5%. If you do 19.5 years you will get NOTHING and you must walk the cursed earth alone. The training states that only 19% of active duty ever make it to this milestone.

New Service members who will enter the Active duty on or after the first of January on two thousand eighteen and are automatically enrolled in the BRS

That means if you are planning to join after 01 Jan 2018 you have no choice but to have the new system of only 2% base pay per year served in pension after 20 years. For example, at 20 years of service you get 40% of base pay, 42% at 21 years. Conversely if you do less than 20 years you still get nothing in terms of the pension.

If you are lucky to be in the group that joined between 1 Jan 2006 and 31 Dec 2017 then you have the gift of deciding what system you want to do by 31 Dec 2018. If you don’t care at all and do nothing you will automatically be grandfathered into the old system of 2.5% per year served after 20 years for the rest of your life.

TSP Match

This plan includes the opportunity for Service members who complete at least sixty days of service to receive automatic contributions and members who complete at least two years of service to receive matching contributions to their TSP account from the Government.

The Government will begin automatically contributing an amount equal to one percent of the member’s basic pay once the member completes sixty days service and will continue these contributions until the member separates, retires, or completes twenty-six years of service, whichever occurs first.

In addition, once a Service member completes two full years of service, the Government will begin matching member contributions up to four percent of basic pay (in addition to the one percent automatic contribution). This is also when a member becomes vested in the Government’s contribution to his or her TSP account plus any earnings on the contributions. Government matching contributions will continue until the member separates, retires, or completes twenty-six years of service, whichever occurs first.

For those on the blended the price of getting a 20% retirement cut, is you have matching TSP. So the new kids and the ones that choose the BRS get a sweet 1% of basic pay from Uncle Sam after 2 months of active duty, but they don’t get to keep it until being fully vested after 2 years of active duty. This is in the form of TSP (which if you haven’t started already shame on you). This 1% goes from two months in until you hit 26 years, or leave active duty, whichever comes first. You will get this bonus regardless of your contributions to TSP! Now after two years they will match up to 4% of your basic pay that you are putting into your TSP. If you are maxing out $18,000 of your own TSP contribution then they will put up to 4% of your basic pay into your TSP. This match plus the automatic 1% makes a total of 5% match. This only goes for 26 years or until you leave active duty.

Unanswered questions

This course is the initial training for leaders. Additional courses will also be developed for: Members eligible to opt into the Blended Retirement System, New Accessions coming into the service on or after January one, two thousand eighteen, Personal Financial Managers and Retirement Service Officers located at installations who are a resource for commanders, Service members and family members

On-line calculators and courses will be available to educate members.

This course and future courses will also be available at the Military OneSource website to facilitate access by Service members and their families.

There is no calcification for people who have done much more than 2 years, will a back match take place? Will we be instantly matched up to 5%, or will we have to do 2 more years before the 4% match takes place? New concepts were brought up in the training, one of which is Continuation Pay:

When a Service member reaches twelve years of service, he or she will be eligible for a cash incentive of a minimum of two-point-five months of basic pay for an Active Component (AC) member, and a minimum of point-five months of basic pay (as if you were serving on active duty) for a member of the RC in return for a commitment of four more years of service.

This is a cash payout, like a bonus.

There is no indication if this is only for those who decide on the new system, or if its available to everyone. The other weird unexplained concept is “Full annuity versus a partial annuity with a lump sum”

A member may elect either full monthly retired pay or partial monthly retired pay with a fifty percent or twenty-five percent lump-sum option

A partial lump sum is calculated as fifty percent or twenty-five percent of the discounted retired pay that will be due a member from the date of retirement to reaching full Social Security retirement age (generally age sixty-seven) and will be offered to members upon receiving retired pay. For a Reserve Component Service member, that payment will be calculated from the earlier of the date a member first becomes entitled to retired pay (approximately age sixty), as opposed to actual date of retirement. The lump sum will be calculated using a personal discount rate determined by the DoD based on applicable studies of personal discount rates.

This scheme smells very much like the old CSB/REDUX where you rob your self of a retirement so you can buy a Camaro today. Not much explained here, but I hope there is more to come.

I am going to recalculate the numbers then using 26 years as the time served since the 1% gift and the 4% match end at 26 years. Will these bonuses exceed the 20% loss in pay with the new plan? The bottom line of the training is this decision to opt in is irrevocable, or final. It cannot be changed at a later date.

Remember, your role as a leader is to provide information and access to education, but NOT TO PROVIDE SPECIFIC FINANCIAL ADVICE.

More to come in terms of applying this new model to situations you may find yourself in.